Crown Holdings Inc (CCK) 2004 Q3 法說會逐字稿

Good morning, and welcome to Crown Holdings' third quarter 2004 earnings conference call. Your lines have been placed on a listen only mode until the question-and-answer session. Please be advised that this conference is being recorded.

I would now like to turn the call over to Mr. Alan Rutherford, Executive Vice President and Chief Financial Officer. Mr. Rutherford, you may begin.

Thank you, and good morning to everybody. This is Alan Rutherford, and I am Executive Vice President and Chief Financial Officer of Crown Holdings. With me on this call are John Conway, Chairman and Chief Executive Officer, and Timothy Donahue, Senior Vice President, Finance.

Let me point out that on this call, as in the news release, we will be making a number of forward-looking statements. Actual results could vary materially from such statements. Additional information concerning factors that could cause actual results to vary is contained in our SEC filings, including comments in the section called "Management's Discussion and Analysis of Financial Condition" and "Result of Operations" in Form 10-K for 2003 and in subsequent filings.

In view of new Regulation G adopted by the SEC, we do not intend to provide non-GAAP financial measures of performance on liquidity beyond those already contained in the Company's earnings release.

I will comment on the numbers, and then John will discuss the quarter before opening the call to questions.

The third quarter was an 18 percent improvement in segment income contained -- continued the excellent year we are having, and resulted in year-to-date segment improvement of 23 percent over last year. The Americas segment income improved 53 percent in the quarter, reflecting improved results from the USA and South American businesses over prior year.

European segment income improved 8.6. After the foreign exchange impact, this is 2 percent improvement, achieving a reasonable result in a very difficult quarter. The weather in the quarter negatively impacted volumes in beverage packaging during this vacation period in Europe, whereas in 2003, a very hot summer drove double-digit volume growth that year.

In Asia, our business continued to operate well, and reported improved results over those of 2003.

During the quarter, and including an add-on which closed on October 6, the Company successfully refinanced 1.5 (ph) billion and 50 (ph) million of first lien (ph) debt. The Company issued a new 7-year euro note at 6.25 percent, locking in a competitively priced coupon in what we believe is a rising rate environment, and reducing our floating debt from 41 percent to 30 percent of total debt. We also reduced the Company's U.S. dollar/euro exposure from 1.4 billion to 900 million, or by 35 percent, securing part of the currency gain recorded since issuance in early 2003.

Additionally, debt maturities on the notes and revolver were turned down to 2010 and beyond, further improving the Company's liquidity and financial flexibility.

The fourth quarter is historically the strong cash flow quarter for the Company, as can be seen in the press release September '03, December 2003. And we are on track to produce at least 200 million of free cash flow in 2004, which will bring net debt down to approximately 3.3 billion by the year end.

At the end of September, the Company's liquidity position was good, with over 650 million of availability. I will now hand the call over to John for his comments.

Thank you, Alan. We had another very good quarter, and we are continuing to show year-on-year improvement. The financial results reflect the focused attention that we have given to our operations around the world and to the outstanding success of our world-class performance system, in delivering continued improvements in productivity throughout our Company.

Also, we think the results speak to the strength that we possess because of our global diversity and product diversity. Simply put, we are not dependent on the quarterly performance of a single product line or a single geographic market.

I want to take the opportunity now to comment on raw materials and interaction with our principal suppliers with regard to raw material pricing for 2005. As all of you know, raw materials across the spectrum are going up in price. It is equally true that our suppliers, whether it be steel packaging, aluminum packaging, or the specialty chemicals that we require for coating and printing, are also seeking significant price increases for 2005.

On this call, we are not going to go into any detail about discussions with our various suppliers. However, we need to make it clear that we anticipate that we will recover in the prices of our products all of the cost increases that we are compelled to accept from our suppliers. We have already begun to talk with our customers about the necessity for this, and to prepare them for the size of the increases. In some markets, we have already announced specific significant price increases to our customers.

Obviously, there is margin risk to Crown associated with the very substantial raw material price increases that are being sought. But we are confident that our market leadership positions and technology strength will enable us to pass along all of the raw material price increases which we receive.

As a last comment, we would point out that we are maintaining our emphasis on improving return on investment capital and using economic profit as a measurement for all of our business units' performance. And we are pleased to see that our results in the quarter in relation to these metrics improved in virtually every business unit.

So in summary, a strong quarter which reflects the hard work of a lot of people throughout the Company, throughout the world, who are committed to committing continuing the good work in the future.

Thanks, John. Operator, we will now open the call up to questions, please.

(OPERATOR INSTRUCTIONS) Christopher Manuel.

A couple of questions for you. First of all, John, could you talk about some of the particular business trends -- i.e., volume -- across the different product segments -- beverage can, food can, etcetera?

Yes, I am not sure we have all of the latest industry data, but I can tell you where we think we are in relation to what we think it is. In the quarter, our beverage volume year-on-year in the Americas was essentially flat with prior year.

And we were off in Europe -- I will go ahead and address the question I know everybody is going to ask. We were off in Europe in unit volumes between 6 and 7 percent for the quarter, frankly -- and up in Asia about 5 percent, so a big segment that you would probably want to know about.

I think, all in all, pretty good performance -- Asia, obviously we are happy about that. The Americas -- quite a strong September, and we are pleased with the overall trends in the market. And in Europe, we think we are pretty much in line with the industry. And considering how rotten the weather was, pretty much across Europe, even extending down to Spain, we are not unhappy with those results. And of course, the comparison was an awfully tough one, as Alan mentioned in his comments -- you know, a phenomenally hot summer across all of Europe during the third quarter last year.

Food cans -- we were about flat in the quarter in the Americas. But we anticipate that North American food can volumes will be strong in the fourth quarter, relatively. The food pack (ph) in the Midwest is continuing and we are having quite a strong October. And food cans in Europe -- up almost 6 percent quarter-to-quarter. And again, the cool, wet summer in Europe, we think, is going to cause -- and we are already seeing it -- more cans sold and packing done in the October period than last year. So that seems to be going quite well, also.

Okay. And one more question, actually, while we have Timothy there -- I think this may -- he may want to address this. But with regards to the potential change in tax law -- at the end of '03, you had about 790 million of undistributed earnings. If the tax bill were to pass, where are those earnings located? Or how could Crown stand to benefit with the ability to repatriate some earnings?

Well, we have earnings spread out among numerous ventures. (technical difficulty) We have (technical difficulty) operations (ph) in 42 countries around the world, and there are earnings and profits in almost all of those locations.

To the extent that funds are not needed locally for debt repayment and/or capital projects, we will look towards aggressively bringing back funds to the United States where we can, not just to take advantage of the new tax law, but because it is good practice for us to continue to bring money back to the parent company who made the original investment in those ventures.

Okay. And John, Alan, what would your primary intention be with that money? Is it to continue to pay down debt?

Yes, it would.

That is (indiscernible) the Company.

Ghansham Punjabi.

Lehman Brothers. Just as a follow-up to the last comments, what was the growth rate for Eastern Europe during the quarter? (multiple speakers) -- in your beverage can business, sorry.

You know, I don't have it, Ghansham. I just -- I don't have that kind of regional breakdown.

Okay, because this 6 to 7 percent decline seems a bit high, even though last year was very strong.

Well, last year was a 13 percent improvement, Ghansham, just as -- you know, 13 percent up (multiple speakers) for the same quarter. (multiple speakers)

We were pretty heavily hit in northwest Europe, and even in Spain.

Okay. But just in aggregate, how much does Eastern Europe represent in your portfolio?

For us, it is not very large, as you know. We don't have any -- in the beverage side, we don't have any manufacturing assets there. And we sell to a small extent -- and I may (technical difficulty) be wrong (ph) about this. (technical difficulty) small cans out of our northern transplant, and we do sell them to the Balkans out of Greece.

But we are very small -- and perhaps a little bit out of Turkey. But we are a pretty small participant in Eastern Europe.

Should we expect an increase going forward? I mean, you know, just (technical difficulty) to diversify (ph) in the European market?

In Eastern Europe?

Yes.

Well, it is a region that is obviously very attractive. And we are very aware of that from a growth standpoint. At the same Timothye, we have all seen growth markets that suffer from excess capacity. So anything we did there would be (technical difficulty) cautious. But it is an area that we have an eye on.

And just one final question -- you know, just putting raw material costs aside for a minute, are there any particular businesses were you feel pricing needs to improve substantially beyond current levels?

Putting raw material aside, I think pricing needs to improve in virtually every one of our businesses. I think, given industry structure and returns on investment and so forth, we would like to see prices up in virtually every product segment, and of course, in particular, in food cans and aerosol cans in North America and food cans in Europe.

George Staphos.

Banc of America Securities. In terms of food can volumes, I missed that before. Did you say European food can volumes were up 6 percent or down 6 percent in the quarter?

Up 6 percent.

Okay -- and continued strong even into the fourth quarter (technical difficulty) the past. Now, John, you announced on the call that you have got out to your customers with some price increase announcements. In those areas, could you relay what you have already announced to the market and where?

George, (technical difficulty) principally (ph) in Europe and (multiple speakers) we are in the range of 17 (ph) (technical difficulty) to 18 percent.

Okay. And that would obviously be aimed at food and Spec Pac (ph), etc., less so in beverage -- correct?

That's correct. It is principally, at the moment, aimed at food in Europe, but the other steel packaging as well. And the percentages vary depending upon this percentage the steel it is of cost of goods sold.

Sure. When do you (technical difficulty) think you will have visibility that you can share as to your (technical difficulty) effectiveness in implementing all of this? I realize you are confident about getting it. But will this be just an (technical difficulty) April 1 event? I should say -- when you think you would have visibility on how successful or not you were in the quarter (multiple speakers) in implementing the pricing?

At the moment, we would say probably a lot earlier than we have had in prior years, because the raw material suppliers are insistent that they want prices agreed and in effect not later than January 1. You are probably aware that, for example, in Europe, the suppliers are taking the position that they are not going to accept orders for January in the first quarter unless a price agreement has been reached.

So I think that whereas in the past, some of these price negotiations with our customers have dragged well into the first quarter because in part the raw material suppliers allowed us to do that, it does not appear that that is going to be the case this year. So certainly, our objective is going to be all price increases must be agreed and passed through not later than January 1.

And you will take that same approach with your customers for obvious reasons?

Absolutely.

Okay. Two last ones, and then I will turn it over. As I have kind of triangulated to the data, it seems to me that pass-through in the quarter was maybe about 5 percent of the 7 points, and maybe a volume and FX were the remaining difference, split 50-50?

Hang on; Timothy's --

(technical difficulty) We can give you -- we have got the numbers.

George, you are talking about revenues?

Yes (technical difficulty) of the 7 -- 7, 7.5 (ph) percent (technical difficulty) growth, I am figuring -- (multiple speakers)

Without currency revenues, revenues were up 2.1 percent -- without currency.

Revenue up 2.1 ex currency.

Yes.

Okay. And aggregate volumes flat, or up modestly?

Aggregate volume, I'm really not -- unit volume -- we don't have the aggregate. It doesn't mean a lot, George, because with crowns and metal vacuum closures and all the rest, it is kind of hard --

I know. Okay, guys -- thanks, I will turn it over. Good luck in the quarter.

Amanda Tepper.

JP Morgan. (technical difficulty) I wanted to ask a couple of questions on the cash flow side and exactly how you end up being comfortable at 200 million. A couple of the key components -- if you could comment on working capital, roughly where was that in the quarter?

(technical difficulty) I understand that there may have been some charges that we didn't at least have in our esTimothyate because of your debt refinancings, maybe some pension payments that got accelerated for tax reasons. And also, if you could comment on your asbestos payments in the quarter --?

Yes, I will comment on that. I will let Timothy chip in here, as well. But obviously last year, we had, as you know, 314 million of free cash flow. A lot of that came out of working capital. Obviously, we think it will take something out of working capital, but not to the level we did last year. And that is obviously having an impact on the third quarter as we go into the fourth.

I don't know if you want to add anything to that, Timothy? No. So, and as you say also, we did have a pension payment which we made in September, which last year would have been in October. And also, if you look, you will find that our capital expenditures to September are about 20 million ahead of where they were last year. It doesn't mean we are going to spend more, it just means we are going (technical difficulty) to spend it a little bit earlier.

So if you look at last year's working capital, you'll find we were taking a substantial amount out -- something like 80 million more than we have this year. And obviously, there comes a moment when we can take a small amount out, but not to that level.

And I think also, one of the reasons that we have seen very good results in the USA is that our working capital was in very good shape coming into this particular quarter. And we have really produced to sell, which has helped improve efficiencies and really driven some good (technical difficulty) numbers (ph) there.

So as I said, we are still on track for 200 million. And as I pointed out on the call, if you look at the cash flow that comes out of the fourth quarter, there is every reason to believe -- and we are sure we are going to be down in above 3.3 billion net number sort of range.

Question about asbestos -- year-to-date September, we have actually paid out cash 30 million, which includes about 18 or 19 million of prior year settlements which we have referred to in the past. The 30 compares to last year at this Timothye 53. And we still believe that the payments this year will not be more than 50 million.

Okay, that is very helpful. Thank you. And then on -- this is a nit, but your tax rate -- what are you now looking at for that year? I think you had said 45 percent previously?

Yes, I think we are still in the 45 range (multiple speakers)

For the full year?

(multiple speakers) -- plus or minus couple of percentage points.

So it is probably going to be much higher in the fourth quarter, then. The book -- (multiple speakers)

Yes. As we said before, the first and the fourth quarter, generally the rate is a little higher than the second and third, only because the business is much fuller in the Northern Hemisphere industry in the second and third quarters.

Okay. With beverage volumes weak in the third quarter, were you still outsourcing capacity in Europe? And what are you -- because I know you were pretty close to out of capacity for the year in European beverage cans. And assuming speculative (ph) growth continues over there, what are your plans to do about building capacity going forward?

You are right. We were oversold in the first half, and sourcing some cans from the industry in the first half. We did not do that in the quarter because of the drop-off. We may have done a little bit in July, but we did very little.

Assuming that growth continues, we are going to need to add incremental capacity. We have been doing some of that over the course of this year. So we think as we project growth rates -- you know, 5 to 8 percent in Europe in beverage cans. We think we can handle that. We know, for example, that we are coming (technical difficulty) doubling of the capacity of our plant in Seville. But we think that looks like it is going to be something like a 2006 event, not 2005. We think we can handle the market growth for next year with the incremental capacity additions that we have been making.

Okay. And then lastly, in Europe and passing through all these big steel hikes, one of the things I have been hearing others in the industry talk about is perhaps switching some beverage cans lines, over Timothye, from steel to aluminum. Is this something you think the whole industry may be doing? Or do you think that the steel companies are trying to stay with right behind aluminum costs to make sure they don't lose that market share of beverage cans?

I don't know. I think it is somewhat concerning; tinplate products as a percentage of steel company sales is very small. And it is not at all clear to me that the steel companies are going to try to staying stay under or around aluminum company -- aluminum packaging pricing. So it is conceivable over the next number of years that there will be some movements to aluminum from steel.

Of course, LME (ph) has been running up pretty sharply, too, Amanda -- so a little hard to say. But none of that can happen for '05. So to the extent that both aluminum/LME (ph) prices are running up reasonably sharply, and they have been, and the steel industry is determined to get price increases across their full product line, and we think they are, it tells us that there are going to have to be price increases in beverage cans in Europe to maintain margin. And it is our intention to do that. We absolutely intend to maintain margin. We see no reason for margin decline in European beverage cans.

Kevin Cohen (ph).

Credit Suisse First Boston. Most of my questions have been answered. I am looking ahead to 2005, though. Does the Company have any guidance in terms of free cash flow targets and net debt by year-end '05?

Well, the only real guidance we have is that it is our intention to generate at least another 200 million of free cash flow in '05.

Okay. And lastly, what has been the response of customers to the large price hikes? Is there a lot of resistance, or do they understand that? Or can you kind of characterize that a little bit?

I would say so far, it has been surprisingly good. The customers are literate, read the newspapers, and understand what is going on with raw material pricing. They are experiencing increases in natural gas and energy and a lot of the other commodities that they use in their operations.

So they are not happy, and they are concerned and so on. But I would say more than any Timothy in the past, they understand fully what is occurring. And I think they understand the inevitability of it.

Okay. And are you seeing support from your competitors in terms of raising prices, too?

As far as we can tell, all of our competitors are in the same situation that we are in. We are not aware of any competitor that has such significantly higher margins than we that they can afford to eat the raw material price increases. So yes, we are seeing pretty good industry support.

Christopher Miller.

JP Morgan. I just wanted to follow-up a little bit on the debt refinancing that you did this quarter. Any plans for any additional refinancings, or are you pretty happy now with your balance between dollar-denominated debt and euro-denominated debt going forward at this point?

Well, obviously, we are happy that the fact that we have reduced our U.S. dollar/euro exposure. And we will be watching closely what happens with the dollar/euro as we go forward. And it may be that we will lock in or cover more of our exposures in (ph) '04. But in principle, we are happy with the refinancing. We don't have any immediate plans to do any further such actions in the next year.

And just as a refresher -- aggregate debt maturities for the remainder of this year, '05 and '06 --?

Well '04, in December, we have 20 million. And January of next year we have 40. And then the only other major note outstanding is the December '06s for 270 million. And beyond that, 2010 is the next point.

(OPERATOR INSTRUCTIONS) Timothy Burns (ph).

2010? Gee, I hope I'm still around then.

Will you still be around them, Timothy?

I hope so. (multiple speakers) I missed a little bit here, but the dollar-denominated debt changed. What did you rationalize it back to now?

Well, what we did -- you know, the recent financing we did -- we raised 460 million euros, which reduced that exposure down from about 1.4 billion to 900 million.

Okay, that is what I was trying to get to. Okay. And John, I have a question for you -- what if all these price hikes for steel, aluminum, energy and would have you, all of a sudden start to slide back and slide back quickly? Is that a good thing or a bad thing?

Raw material prices were to begin to fall dramatically, quickly?

Yes.

Well, I don't know, Timothy, because I don't spend much Timothye thinking about that, frankly. It is one of those far out hypotheticals. Everything we see, and we have had a lot of advisers helping us take a look at why raw material prices, particularly those that we are so dependent upon -- why they are rising as they are. And we just can't see over the next 2 to 3 years -- there may be periodic pullbacks of a temporary nature. But we just think it is so highly unlikely we are not thinking about that. If it happens, then call us then. We will talk about it then.

You think this is hypothetical? (laughter) I have been thinking about it for 5 minutes. It is funny, because, you know, the things they are doing in China to kind of rein in the gross -- gamesmanship (ph) that are going on there, what they talk about will happen after the election here, $50 a barrel oil -- you know, as fast as this stuff went up, all the steel and aluminum stocks are being downgraded. And you know those guys are right half the Timothye, unlike the great packaging analyst.

But you just wonder -- I would think you would make better margins in a -- environment where raw material prices slide back. And I think '05 could be a year where that happens.

Could be. We just had one of our management meetings, and our Asian management, and they are in China. In fact, as you know, we have a pretty large packaging company in China spread right across the country. And they said notwithstanding what you are reading in the newspaper, road construction, bridge construction, building construction, new factory construction continues.

And the Chinese have every intention of growing at 8 to 10 percent from now at least through 2008 and probably 2011, when they are going to have the Shanghai Expo.

You are right. So maybe things just stay real firm here for quite a while. I was just curious.

The one business you guys don't talk about very much anymore is the plastics business, which is, I think, largely closures -- it is $550, $600 million. My sense is you do pretty well in it. Otherwise, you probably would have sold it already. Is it a business that is doing good things for you? And would you plan to grow it when the Timothye was right?

Yes, it is doing very well. And what we are doing now, of course, is maintaining it and growing it marginally, as we plan to keep it for the long-term. And we are just very pleased with it.

And this is the old Obrist and Zeller if I recall?

Yes. It is a combination of the old Crown beverage closure business and the Carda (ph) metal box specialty closure personal care food business.

Okay, got you. So the name of the game and for you guys right now is really just keep your eye on the ball, keep prices growing in line with or faster than, slightly, let's say, than raw material costs, and pay down debt. When will we cross over that threshold, Alan, where you can begin to grow more externally through whenever means -- M&A or accelerated CapEx or what have you? Are we still a couple of years away, or --?

What we have said, Timothy, is that we would like to see our net debt down to about -- below 3 billion by December of '06, which just sort of -- you know, '05, '06, 2 years away. And we should be down to below 3 billion of net debt.

As you have just said, if we can improve marginally our profitability, our EBITDA, then of course our leverage ratio will be much, much better. Even though it is going to improve a lot by the end of this year, it will improve even more by than.

Got you.

So that is the sort of target we have in mind.

Got you. So late next year sounds like, if everything works out, you guys could get back on the horse.

Yes, possibly.

Very carefully, Timothy.

Yes, I'm wondering -- as this whole process of leverage and extreme competition -- it has really made you a much better Company, wouldn't you think, John?

(laughter) Well, I mean, to the extent that a near-death experience makes you appreciate life a lot more, I suppose you are right. I mean, look -- we think we are running the business with a great deal more discipline than we have in the past, and with a lot more focus. And we think running (ph) it for cash, we throw in invested capital, and using economic profit as we have is working well for us.

And the other thing, though, is that we have been fortunate that the kind of structure and dynamics of the industry have worked out well. You know, there was a lot of consolidation around us as we were doing our consolidation. And it would appear that in most of our segments, the managements of our competitors have come to similar conclusions as we have about the nature of the business and what needs to be done with it. So we have been very, very fortunate in addition to trying hard.

Got you. Well, listen -- thanks for the comments, and have a good fourth quarter.

Sharon Van Winkle (ph).

Independence United Capital. A couple of questions for you -- first, could you give us an idea of how much can prices are up year-over-year, and how that compares with some of the competing products -- you know, the plastic and glass containers?

We have such a range of cans in so many regions. I don't really have that information here. But I will say that we think cans are very competitive with every packaging medium that we are familiar with. And so we think that the cost/value proposition for our customers with regard to cans continues to be excellent.

Okay. And exchange rates -- I think last quarter you gave us an idea of this exchange rate impact on sales by geographical segment. Could you kind of run through that?

Yes, I think we can.

Yes. As we said earlier, in total, if revenues were up 7.5 percent, excluding exchange, they were up 2.1. And I will just give you the numbers excluding exchange in the quarter for each division -- in the Americas, 4.2; Europe was up 0.1, so essentially flat; and Asia was up 6.3 excluding currency. There was no currency impact in Asia.

Okay. So then in the Americas, is it fair (technical difficulty) to say that since volumes were basically flat (ph), (technical difficulty) prices would have been up about 4.2 percent?

Well, the volumes that I was referred to in the Americas were for the quarter. (multiple speakers) And that was his reference. (technical difficulty) That would be fair.

Okay, I'm sorry; weren't these percentages for the quarter? These three percentages? (multiple speakers)

Yes, I was agreeing with you.

Christopher Manuel.

KeyBanc Capital Markets. Just a quick follow-up. If we continued in food can in particular to see price increases up in the high teens -- or sorry, high 16, 15, 17, 18 (ph) percent range, (technical difficulty) at what point does substitution become a viable alternative? The cost delta between a food can and some other sort of alternatives becomes smaller, right?

Yes, I think (ph) (technical difficulty) it is worth keeping a few things in mind. I haven't done this as far back as I am going to suggest now. But if we went back 7, 8 years ago, I suspect that the kinds of price increases we're talking about for food cans would take us back (technical difficulty) to that point. So it is not as if these prices are going to be historically out of line.

The other thing to keep in mind, and I know you are aware of this, of course -- is oil price, resin price is also affecting plastics. And energy prices, obviously, are affecting glass. So we just do not see that price increases for food cans in the range of 15 to 20 percent, which we think generally speaking globally is what's going to be needed, are going to -- is going to change anybody's idea about what they should do with regard to package mix.

Andrew Gundlach.

Artemis Advisors. Congratulations on an excellent quarter, and good morning. Interest expense going forward with the debt paydown after you pay down the 6 notes, and I guess you will pay down the term notes as you have to -- can you give us a little help on understanding that over the next 6 quarters or so?

(multiple speakers) Are you just looking at interest expenses as we forward? I think if you take Alan's statement earlier in response to '05 cash flow, where we were committed to generate another 200 million of cash flow to pay down debt, and if you apply an average interest rate to that number, and multiply it by 200 million, you can back off the interest expense. So I -- average interest expense, average debt that we will retire -- a 7, 7.5 percent range. So 14 or 15 million per year.

14 or 15 million per year is the reduction? (multiple speakers)

Yes.

Exactly. Okay. Good. (multiple speakers) Second thing is with respect to --

(multiple speakers) -- constant interest rates on the floating debt.

Sorry?

Assuming constant interest rates on the floating debt.

Exactly. And you haven't changed any of your -- actually, that brings up a good point. You haven't changed any of your hedging on the -- your LIBOR rates, right?

No; the only thing is as Allen mentioned earlier, was by doing the new fixed (ph) notes, we have reduced the floating debt from 41 to 30 percent (multiple speakers)

Right, okay. And is going back to the pricing question earlier, given what you have told us on volume and currency for the three regions -- and obviously, there is mix which is very difficult to figure out from our perspective. But it looks like that price was actually down a little bit in Europe (technical difficulty) year-over-year, and up in -- up 4, 5 percent or so in the Americas, and kind of flattish in Asia.

Is that -- which is not -- which is I guess similar to what you just said, except with respect to Europe. Maybe you can just run us through Europe once more in terms of volume, price, and currency?

Yes. Part of the problem with Europe is that there is such a mix effect (multiple speakers) across all the different product lines, and I would characterize (technical difficulty) pricing as being essentially flat. But because of the mix effects with aerosol (technical difficulty) cans, food (ph) cans in different regions and all of the rest of it, it may be the mix effect that you're seeing.

So mix would have been negative? And when you say negative mix, that means more aerosol and less food? Or what does that mean? (multiple speakers)

It might mean more food cans in a part of (technical difficulty) that are somewhat lower-priced than others, that kind of thing.

I understand. And then how should we think of -- is that -- that negative mix, I can't believe that you expect that to continue. That must be kind of a one-off type of thing.

No, I don't. I mean, I fully expect -- we have really, in Europe, from a unit/volume unit volume standpoint, relatively disappointing performance. I talked about the beverage packaging performance, which was somewhat negative. But all the personal care products were, we think, somewhat negatively affected, which would hurt aerosols for us and some of the other segments.

And the third quarter in food was relatively down, although we were happy to see it was up versus prior year -- but relatively down because of the cool, wet weather. So we think the volume transit should be -- we expect, would be better in Europe next year than this, assuming we had a more normal summer, if there is ever a normal summer in Europe.

And it sounds like, based on what you said earlier, that that negative mix effect has kind of reversed itself in the fourth quarter a little bit -- at least to what you can see thus far.

Well, it is too soon to say. But we are starting out pretty well.

If there is one more question, Operator, we will take it.

Tom Abrams (ph).

Columbia Management. I just had a quick question on the net debt target. Just a clarification -- what you include in that? I want to -- asbestos, pension, for instance --

Everything.

Where you put your net debt today?

Net debt today?

Yes.

It's 3662 at the end of September, (multiple speakers) total debt less cash.

Okay.

Thank you. That concludes Crown Holdings' third quarter conference call. We thank you for your interest.